Here's What's Concerning About Rawasi Albina Investment's (TADAWUL:9547) Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Rawasi Albina Investment (TADAWUL:9547) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Rawasi Albina Investment:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.15 = ر.س34m ÷ (ر.س297m - ر.س72m) (Based on the trailing twelve months to June 2025).

Thus, Rawasi Albina Investment has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 9.3% it's much better.

See our latest analysis for Rawasi Albina Investment

Historical performance is a great place to start when researching a stock so above you can see the gauge for Rawasi Albina Investment's ROCE against it's prior returns. If you're interested in investigating Rawasi Albina Investment's past further, check out this free graph covering Rawasi Albina Investment's past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of Rawasi Albina Investment's historical ROCE movements, the trend isn't fantastic. Over the last four years, returns on capital have decreased to 15% from 23% four years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Rawasi Albina Investment. However, despite the promising trends, the stock has fallen 37% over the last three years, so there might be an opportunity here for astute investors. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Rawasi Albina Investment (of which 3 are concerning!) that you should know about.

While Rawasi Albina Investment may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.